DP16858 Optimal Information Disclosure in Auctions
|Author(s):||Dirk Bergemann, Tibor Heumann, Stephen Morris, Constantine Sorokin, Eyal Winter|
|Publication Date:||January 2022|
|Keyword(s):||auctions, Conflation, Digital Advertising, information design, information disclosure, Second-price auctions|
|JEL(s):||D44, D47, D83, D84|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16858|
We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-off: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising.